Gross critical of Greek ‘credit event’ CDS ruling

PIMCO’s Bill Gross has criticised the decision by the International Swaps and Derivatives Association (ISDA) that Greece’s debt restructuring should not spark a payout on credit default swaps.

The ISDA ruled on Wednesday there had been no ‘credit event’ with regard to the bonds, meaning the swaps will not pay out.

Greek creditors will see an initial €186bn of bonds swapped for longer-maturity debt next week and ‘voluntary’ haircuts have been enforced via retroactive collective action clauses.

Speaking to CNBC, Gross said the decision would have “upset” him were he a buyer of protection on Greek debt.

“If insurance for CDS and protection against default for countries is invalidated that would be much like taking an insurance policy out for flooding and then have companies say it was rain as opposed to flood damage that produced the carnage,” he said.

PIMCO was one of 15 groups who ruled unanimously that the Greek restructuring did not constitute a credit event. Gross later told Bloomberg he had not been party to the committee’s decision.

ISDA did leave the door open to further rulings, however, and Gross agreed that other action may be forthcoming.

“The committee was asked to rule on a specific portion of the agreement; perhaps there is more to come,” he said.